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Detroit is officially broke. But the Motor
City has been unofficially broke for decades. That is exactly
why some entrepreneurs go there.

Governor Rick Snyder announced on Thursday
that he authorized Detroit to file for chapter 9 bankruptcy
protection. Snyder called it a “difficult and painful step,”
but he did not see any other way to get the city out from
under the $18 billion in debt it's facing.

Entrepreneurs in town know that Detroit is struggling
financially. If they choose to start up in a city that is, as the
mayor himself says, in financial crisis, then they know that
there are going to be some hardships. “The bankruptcy is not a
surprise,” says Jacob Cohen, a partner at Detroit Venture Partners, which backs seed
and early-stage technology companies. “The city is looking for
a fresh start. The bankruptcy will help.”

Today, Detroit has 700,000 residents, far fewer than the almost 1
million people who called the Motor City home more than 90 years
ago in 1920 and half the 1.6 million people who lived there in
1940, according to the U.S. Census Bureau. As
the population plummeted, tax revenues dwindled and city
coffers slowly shriveled. As Snyder says, the bankruptcy has
been 60 years coming.

Detroiters have been living with sub-par public services for
years. Fire and medical staff are stretched thin, and street
lights stay out for too long. Governor Snyder has said that the
bankruptcy filing will allow the city to spend more money on
public services because less of its money will be hurdled toward
paying interest on debt. Over the next 10 years, $1.25 billion will
be spent improving police and fire protection, trash pickup
and street lighting, says Snyder.

To be sure, Detroit is not for everyone. If you're looking to
launch your business in a pristine city, where the government can
provide cushy resources, it's not the place for you. But, there
are many good reasons for entrepreneurs to stay in or move to the
Motor City. Here are a few:

It’s cheap. For now. “The burn rate in Michigan
is a fraction of what it is in Boston, New York, Silicon Valley,
Chicago and frankly many other locations,” says Mike Finney, the
president and chief executive of the Michigan Economic Development Corporation,
a public-private partnership advocating for business in the
state.

And it may not be this cheap forever. “This is a ground-floor
opportunity for individuals who want to live, work and play, and
find opportunities to do it at a cost that you will probably
never see again,” says Finney. The population exodus that Detroit
has suffered means a lot of office space was left vacant, and
empty buildings are being rehabilitated into working space, says
Finney.

For example, Dan Gilbert, the chairman and founder of
Quicken Loans Inc. and majority owner of the NBA’s Cleveland
Cavaliers, has bought more than 30 buildings in downtown
Detroit. “Those buildings are all being rehabbed and occupied
by businesses at a rate that is just staggering,” says Finney.

Detroit’s airwaves aren’t glutted. “You don’t
have the media outlets getting pitched every minute of every day
by new startup ideas and new startups to cover,” says Cohen.
“It’s a nice platform to get national press.” There’s also plenty
of local press, including the Detroit News and Crain’s Detroit Business.

There is a growing sense of new, young energy with a
frontier spirit. For the first time in more than three
decades, young people are staying in Michigan. “Young people left
forever, and now they are staying,” says Cohen.

When Cohen moved into an apartment in downtown Detroit in Feb.
2011, he had the upper hand in negotiating his rent. Now, he
says, there are waiting lists at downtown apartment buildings.
That's partly due to limited supply. People haven’t historically
wanted to live in downtown Detroit. Lately, innovative companies
are increasingly interested in investing in the city center over
the suburbs, and they are attracting the younger set.

Michigan has always been a manufacturing hub.
“Michigan does have a tremendous legacy of entrepreneurial
activity,” says Finney, ticking off icons Henry Ford, W.K.
Kellogg and Charles Stewart Mott.

The state has a history of, and infrastructure for, making
things, says Rick DeVos, CEO of Grand Rapids, Mich.-based
Start Garden, a seed fund that distributes
$5,000 loans to startups. "The whole state is rediscovering
its entrepreneurial muscles," says DeVos. "A hundred years
ago, Detroit was the Silicon Valley of the world."

The startup community is relatively small. The
number of startups in Detroit is small compared to cities like
New York or San Francisco. That means less competition. “You have
the ear of first customers potentially,” says Cohen.

You can play a role in the comeback story.
Entrepreneurs go out on their own because they want to make a
difference. In Detroit's less crowded startup ecosystem, you have
an opportunity to make a difference. “You build a successful tech
company, and you are bringing back a region,” says Cohen. “It’s a
startup community on the rise. You are basically going to be
riding a wave of growth.”